Scottish Water should have increased flexibility to generate green energy, develop commercial opportunities and could take on additional functions under proposals set out today.

The Scottish Government's proposals are contained in a consultation paper, 'Building a Hydro Nation', which examines how Scotland, in particular Scottish Water, as a publicly-owned utility, can better exploit its expertise, assets and Scotland's water resources for the continuing benefit of water customers, the environment and the wider Scottish economy.

First Minister Alex Salmond said: "Scottish Water, already a huge success story, has the potential to play a greater role in the development of a low carbon economy and grow from a successful utility to become a widely based, dynamic, world-leading water organisation, while remaining within public ownership.

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"Since its creation, Scottish Water's efficiency has improved at a quicker rate than any of the UK's privatised water companies and average household water charges are now #15 lower this year than in England & Wales.

"Scotland has a world-leading emissions reduction target and is spearheading the transition to a low carbon future. A new era for the management and use of Scotland's water builds on these actions."

He continued: "This consultation seeks views on the range of opportunities for Scottish Water to take on new activities - from converting redundant treatment works into recycling facilities to putting hydro electric schemes in redundant reservoirs; from upgrading sewage treatment plants to harvest biogas, to new wind power projects on its land."

"As Scottish Water develops its wider role, we remain committed to ensuring that average customer charges rise by less than inflation, giving the customer the benefits of public ownership through better service and lower bills. But recent debates which see Scottish Water as a utility to be sold or mutualised completely miss the point. In giving Scottish Water room to grow, within public ownership, we have the potential to create a great Scottish enterprise," he added.

(GK)